Olmert coalition ally demands he step aside

Israeli Defence Minister Ehud Barak called today for Prime Minister Ehud Olmert to step aside over corruption allegations or face a collapse of his coalition that would disrupt peace talks with the Palestinians.

A day after an American businessman told an Israeli court how he handed Olmert envelopes stuffed with thousands of dollars in cash, Barak held a news conference to lay out the position of his Labour party, the junior partner in Olmert's coalition.

Though Barak, himself a former prime minister, stopped short of action that would immediately bring down the government, the political turmoil threatened to derail US efforts to secure an Israeli-Palestinian peace deal before President George Bush steps down in January.

"I do not think the prime minister can run, in parallel, the government and deal with his own personal affair," Barak said.

"Therefore, out of a sense of what is good for the country and in accordance with the proper norms, I think the prime minister must disconnect himself from the daily running of the government.

"He can do this in any of the ways open to him - suspension, vacation or resignation or declaring himself incapacitated. We will not be the ones to determine this."

Barak put the onus on Olmert's centrist Kadima party to seek a new leader to replace the prime minister: "If Kadima does not act and a government is not formed during this current session of parliament that is to our liking, we will act towards setting an agreed and early date for elections."

A parliamentary election is not due until 2010. A defection by Labour would almost certainly force an early ballot. Polls indicate that the right-wing opposition Likud led by Benjamin Netanyahu could be the strongest party after any snap election.

Netanyahu is deeply sceptical of the present peace processes with the Palestinians and with Syria.